Paying for college takes dedication. A savings shortcut doesn’t hurt, either.
That’s why more families are taking advantage of 529 college savings plans.
Not only can you get a tax deduction or credit for contributions (more than 30 states and the District of Columbia offer a direct state tax deduction for your contributions), earnings grow on a tax-advantaged basis and, when you withdraw the money, it is tax-free if the funds are used for qualified education expenses such as tuition, fees, books and room and board.
The new tax law even expanded the use of plans to include private-school tuition from elementary through high school. Families now have the option to use up to $10,000 in annual tax-free 529 plan withdrawals to cover those early educational expenses.
Total investments in 529s reached a record $328.9 billion this year, up 3 percent in the last six months, according to the College Savings Plans Network.
The average account size also rose to $24,153 in the first half of 2018, up from $24,057 at the end of 2017. (See the chart below from the College Savings Plans Network.)